BCRH is priced at one times book value, with no operations priod to the IPO.

Conclusion

The rating on BCRH is avoid. Newly formed reinsurance companies typically show losses for the first year or so while they are starting up operations, then they often move to profitably, partially as a result of having no legacy (writeoff) issues.

Business

BCRH is a newly formed Bermuda reinsurance holding company seeking primarily to offer collateralized reinsurance in the property catastrophe market.

Its principal objective is to pay dividends by underwriting a diversified portfolio of short-tail reinsurance contracts and investing in insurance-linked securities with what it believes to be attractive risk and return characteristics.

BCRH will seek to provide its shareholders with the opportunity to own an alternative asset class whose returns BCRH believes have historically been largely uncorrelated to those of other asset classes, such as global equities, bonds and hedge funds.

Managed by Montpelier Re (MRH), $1.39 billion market cap

Subsidiaries of Montpelier Re Holdings Ltd. ($MRH) will manage BCRH’s reinsurance underwriting decisions and will provide BCRH with the services of its Chief Executive Officer and its interim Chief Financial Officer.

Montpelier is a global provider of property catastrophe and short-tail reinsurance solutions, and provides customized and innovative insurance and reinsurance solutions to the global marketplace.

As of September 30, 2013, Montpelier had total assets of $3,977 million and total shareholders’ equity of $1,695 million. BCRH intends to leverage Montpelier’s reinsurance underwriting expertise and infrastructure to conduct BCRH’s business.

Montpelier Reinsurance Ltd., a wholly owned subsidiary of Montpelier, has agreed to purchase 2,500,000 common shares through a concurrent private placement upon completion of this offering. Following the completion of this offering and the concurrent private placement, Montpelier will own approximately 29% of BCRH’s outstanding shares, or 26% if the underwriters’ option to purchase additional shares is fully exercised.

Dividend policy

Subject to the discretion of its board of directors, BCRH currently intends to distribute a minimum of 90% of its Distributable Income, as defined in “Dividend Policy,” in the form of cash dividends to its common shareholders.

BCRH intends to make regular quarterly dividend payments, supplemented by a special dividend to meet its dividend payout target for each fiscal year.

BCRH expects that in most years the sum of its regular quarterly dividend payments will be less than 90% of its Distributable Income

BCRH expects to net $175 million from its IPO, including sale of 6.25 million share to the public and 2.5 million shares to Montpelier Re Holdings (MRH).

BCRH expects to deploy most of the net proceeds of this offering and the concurrent private placement during the nine-month period following the completion of this offering. BCRH will retain the remainder of the proceeds, which it expects will be sufficient to fund its ongoing operations for at least 15 months following the completion the IPO.

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